VAT Question

[philuk2000]

Hi,

I am a sole trader and am not VAT registered nor am I planning to become VAT registered any time soon. I supply retail computer software to my customers (Microsoft Office, etc) and obviously when I purchase this from my suppliers I am charged VAT. I sell this to my customer and add my own mark up but a few of my customers have asked for VAT receipts so they can claim the VAT back on goods I have supplied them.

Example Scenario:

Supplier charges me £100 (includes VAT)
I charge my customer £110 (£10 mark up NOT VAT)

Where do I stand here?

Regards
Phil.

[elainec100@cheapaccounting]

You cannot charge vat as you are not vat registered so there is no vat invoice to give them.

[Maslins]

Basically in that scenario the setup is very bad, as nobody can claim back the input VAT.

If you were VAT registered you could claim it back, then charge them VAT which in turn they could claim back. But as it is, you can't claim the VAT back, and so essentially you pass on the VAT inclusive price to them and they can't claim anything either.

[davebrown]

Might make sense to register voluntarily, if you can deal with the admin.

You would still buy for £100 inc VAT, which is actually £86.96 + VAT. You sell for something £96.96 + VAT (111.50), but your customer can reclaim the VAT if he's VAT registered. The customer therefore gets a better deal. You pay HMRC the difference between the VAT on purchase and VAT on sale - but in addition, you are able to reclaim VAT on other business overheads, including any equipment that you purchased in the last three years, provided you still have it.
Cheers
Dave
davebrownvat.com

[elainec100@cheapaccounting]

Unless he has other non vat registered businesses he sells to.

[hendyphilhendy]

It's definitely a case of looking at your customer profile. Often if you are dealing with larger customers they will expect their supplier to be VAT registered so that they can claim back the vat.

[elainec100@cheapaccounting]

I agree - I wouldn't just jump into vat reg for one customer.